Term 3: Our Economy (Slides 1) Flashcards
What is scarcity?
scarcity is the question of satisfying UNLIMITED WANTS with LIMITED resources.
What are the economic resources?
- Land
- Labour
- Capital
- Enterprise
What are the economic resources?
- Land
- Labour
- Capital
- Enterprise
What is the size of an economy measured with?
GDP (Gross Domestic Product)
What is GDP?
GDP is the total value of all goods and services produced in the economy in a single year.
What does the Economic Model Show?
Shows the flow of money between sectors of the economy.
What does the Business Cycle Show?
Tracks GDP of an economy over time.
What are the sectors of the economic model?
- Households Sector
- Firms Sector
- Financial Sector
- Government Sector
- Overseas Sector
S + T + M =
S + T + M = I + G + X
MEMORISE ECONOMIC MODEL DIAGRAM (NO PHOTOS ON BRAINSCAPE)
MEMORISE ECONOMIC MODEL DIAGRAM (NO PHOTOS ON BRAINSCAPE)
Injections are _________
Injections are expansionary
Injections are _________
Injections are expansionary
Injections are _________
Injections are Expansionary
Leakages are _________
Leakages are contractionary
What are the different injections?
(I) business investment
(G) government expenditure
(X) exports
What are the different leakages?
(S) savings
(T) taxation
(M) imports
How do you know if a government has a deficit or surplus?
(T) taxes - (G) government spending = deficit or surplus
When does a government have a deficit?
A deficit occurs if taxes are insufficient to cover government spending in a financial year.
How does the government pay for deficits?
Debt (mainly)
When does a trade deficit occur?
A trade deficit occurs if imports are more than exports.
Net Exports (NX) =
Net Exports (NX) = Exports (X) - Imports (M)
MEMORISE BUSINESS CYCLE DIAGRAM (NO PHOTOS ON BRAINSCAPE)
MEMORISE BUSINESS CYCLE DIAGRAM (NO PHOTOS ON BRAINSCAPE)
What is a contraction? (business cycle)
decreasing economic activity (GDP)
What is an expansion? (business cycle)
increasing economic activity (GDP)
What is a recession? (business cycle)
2 quarters of falling GDP
What is a depression? (business cycle)
4 quarters of falling GDP (sustained recession)
What is the main economic problem during a recession?
not enough spending.
What is the main economic problem during a boom?
too much spending.
What are the key indicators of economic contraction?
- falling levels of production (output)
- decreasing consumer spending
- rate of inflation may fall
- wage rates generally fall
- interest rates eventually fall
- level of unemployment rises
What are the key indicators of economic expansion?
- rising levels of production (output)
- increasing consumer spending
- rate of inflation may rise
- wage rates generally rise
- interest rates eventually rise
- level of unemployment falls
